Penalty for tax delay requires proof of evasion; lawfully collected tax remitted to the State cannot be forfeited.

Penalty under the Karnataka Value Added Tax Act was treated as dependent on culpable conduct, not automatic application. Where the assessee filed a revised return shortly after collection and paid the tax with interest within 11 days, the absence of deliberate evasion or mala fide intention meant the penalty was unsustainable. The article also notes that tax and interest collected from the purchaser and remitted to the Government could not be forfeited under section 47(2)(b), because the amount was lawfully payable to the State and the Tribunal lacked jurisdiction to order forfeiture on those facts.

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Issues: (i) Whether penalty under section 72(2) of the Karnataka Value Added Tax Act, 2003 was leviable on the assessee for delayed payment of tax after filing a revised return within 11 days. (ii) Whether the amount collected from the purchaser and remitted to the Government could be forfeited under section 47(2)(b) of the Karnataka Value Added Tax Act, 2003.

Issue (i): Whether penalty under section 72(2) of the Karnataka Value Added Tax Act, 2003 was leviable on the assessee for delayed payment of tax after filing a revised return within 11 days.

Analysis: The subject-matter before the Tribunal was the validity of the penalty. The assessee had collected tax, filed a revised return shortly thereafter, and paid the tax with interest within 11 days. On those facts, the element of deliberate evasion or mala fide conduct was absent. Penalty provisions are not to be applied mechanically and require a showing of intention to evade tax or equivalent culpable conduct.

Conclusion: The penalty was not leviable and the order imposing penalty was unsustainable.

Issue (ii): Whether the amount collected from the purchaser and remitted to the Government could be forfeited under section 47(2)(b) of the Karnataka Value Added Tax Act, 2003.

Analysis: The amount represented tax and interest collected from the purchaser and remitted to the Government. The Tribunal had no jurisdiction to forfeit that amount when it was lawfully payable to the Government and the assessee had no right to retain it. Forfeiture in these circumstances was held to be outside jurisdiction and illegal.

Conclusion: The forfeiture under section 47(2)(b) was set aside.

Final Conclusion: The revision petition succeeded only to the extent that the penalty and forfeiture orders were both quashed, leaving no adverse fiscal consequence against the assessee.

Ratio Decidendi: Penalty under a tax statute is not automatic and can be imposed only where evasion or mala fide conduct is established, while an amount collected as tax and remitted to the State cannot be forfeited when the statute does not authorize such forfeiture on the facts found.

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